Tower Health has officially recognized what has long been obvious: The hospitals, urgent care centers, and other businesses that it bought for at least $480 million from 2017 to 2019 are not worth nearly what the system paid.
That’s why the Berks County nonprofit, anchored by Reading Hospital, in West Reading, recorded a $370.7 million loss on those businesses in its audited financial statements for the fiscal year ended June. 30, which were released Wednesday.
The write-down “does not impact cash on hand or our ability to meet any financial obligations,” Tower said in a statement. On June 30, Tower had $552 million in cash, down from $723 million the year before, according to Fitch Ratings. Both cash figures exclude cash advances Tower has to pay back to Medicare.
Still, it leaves the organization saddled with interest and debt payments on businesses that Tower and its auditor, KMPG, consider severely impaired after unsuccessful attempts to sell them.
Tower was slightly profitable in the three months ended June 30, but it has not released its financial results for the three months ended Sept. 30. Those results will provide a sense of whether the financial recovery Tower management has touted since March continued over the summer.
It was a positive for Tower that Fitch Ratings last week lifted its outlook on Tower from negative to stable. That means Fitch considers Tower to be “on a more strategically viable path,” the credit-ratings agency said.
“We expect to continue to see further positive impacts from our strategic actions,” Tower said.
The $370.7 million impairment represents clean-up from past mistakes.
It came in three buckets: one amount for five hospitals bought in 2017, one for the 19 urgent care centers bought in 2018, and another for St. Christopher’s Hospital for Children, which Tower bought in 2019 in a joint venture with Drexel University.
Tower paid $426 million for Brandywine, Chestnut Hill, Jennersville, Phoenixville, and Pottstown Hospitals. The write-down on those hospitals was $292.9 million, or nearly 80% of the total. Tower had previously recorded a $23.6 million loss on Brandywine.
The urgent care centers, bought for $24.3 million, were housed in an entity called Tower Health Enterprises. That had a write-down of $26.7 million, which likely included other businesses besides care centers.
Tower and Drexel paid $58 million for St. Chris ― not including the real estate, which was sold separately and is now leased by them. Tower’s financials show a $51 million write-down on the North Philadelphia safety-net hospital.
Tower said last month that it planned to close Jennersville Hospital in West Grove on Jan. 1 and had a preliminary agreement to sell Chestnut Hill Hospital and at least a dozen urgent care centers to Trinity Health Mid-Atlantic. It is still working on a way to keep Brandywine open and looking for a way to put St. Chris under new ownership.